MCQ 2023-2024

Question 1

An investment that pays a constant cashflow amount every year for a finite number of years is referred to as:
A. An annuity
B. A perpetuity
C. An ambiguity
D. An ordinary share

Answer 1

A. An annuity

Question 2

Beta is a measure of a security’s:
A. Diversifiable risk
B. Systematic risk
C. Financial risk
D. Operating risk

Answer 2

B. Systematic risk

Question 3

Financial Management decision making refers to making decisions about:
A. Project and asset investment
B. Methods and sources of finance C. Distribution of profits
D. All of the above

Answer 3

D. All of the above

Question 4

The process of finding future values is frequently called:
A. Discounting
B. Leasing
C. Annualising
D. Compounding

Answer 4

D. Compounding

Question 5

Shareholder returns can take the form of:
A. Proceeds from the sale of the stock
B. AandD
C. Periodic interest payments
D. Periodic dividend payments

Answer 5

B. Aand D

Question 6

Which of the following is considered a short-term approach to managing working capital?
A. Inventory management
B. Equity financing
C. Debt refinancing
D. Investment in fixed assets

Answer 6

A. Inventory management

Question 7

In capital investment appraisal, the discount rate used in the net present value (NPV) calculations is:
A. The project’s internal rate of return.
B. The rate at which the company can borrow funds.
C. The company’s weighted average cost of capital.
D. The company’s average return on investment.

Answer 7

C. The company’s weighted average cost of capital.

Question 8

Difficulties arise with the use of IRR for investment appraisal where:
A. There is more than one sign change in the pattern of cashflows over a project’s life.
B. The investment is mutually exclusive.
C. There is a borrowing opportunity.
D. All the above.

Answer 8

A. There is more than one sign change in the pattern of cashflows over a project’s life.

Question 9

If the IRR of a project is more than the required rate of return of the company, the project should:
A. Be accepted as it will be wealth creating for the shareholders.
B. Be rejected because it is wealth destroying for the shareholders.
C. Be compared to the payback period.
D. Be subjected to additional risk assessment due to the high IRR possibly
indicating higher risk.

Answer 9

A. Be accepted as it will be wealth creating for the shareholders.